VANCOUVER (miningweekly.com) – The development of Gensource Potash’s first 250 000 t/y production module at its Vanguard project, in Saskatchewan, is another step closer to realisation after the company announced on Friday that it has signed a definitive offtake agreement with a major North American agriculture industry leader.

Saskatoon, Saskatchewan-based Gensource said that, with the formal definitive offtake agreement now in hand, it will move to complete its project financing plans, which will allow the first of a new breed of potash production plants to be built.

"This agreement represents a true milestone in the development of Gensource’s potash business strategy. As I indicated when announcing the memorandum of understanding with the offtaker, by combining a modern production facility, with its efficiency and significantly reduced environmental footprint, with the vast resources of the offtaker, we believe the two groups together represent the new face of the potash supply chain in the agriculture industry,” Gensource president and CEO Mike Ferguson said.

The fact that Gensource Potash has been able to secure two memoranda of understanding from separate US offtake partners (with one now definitive) that support the establishment of a new and independent supply of potash, speaks to a certain malaise in the continent’s crop nutrient market, Ferguson pointed out to Mining Weekly Online in a recent interview.

“This is a concrete piece of evidence that proves production is far too concentrated in the hands of only a few players. The existing producers have their customer base in fear of stepping outside of the existing supply chain."

Gensource revealed on Friday that several financing institutions have already reviewed the agreement and have provided input to it in its draft form. It said that the financiers' comments have been incorporated into the final agreement with a goal of creating a stronger, more financeable agreement.

Under the terms of the contract, the industry major will take the entire production from the first modular project. The agreement also provides a preliminary marketing plan that facilitates Gensource’s goal of creating a direct link between a potash producing facility in Saskatchewan and the end-user.

The contract is for an initial ten-year term, with an option to renew it for the life of the project. The deal also provides certain rights of first refusal for the offtaker to buy any further product that may be produced at the project, either through de-bottlenecking or expansion of the productive capacity of the facility, and to buy the project should Gensource choose to sell any portion of it.

The Vanguard One project has a pre-production capital cost of C$279-million, with an 18- to 22-month construction period. The facility is designed for low cash operating costs of less than C$53/t, even at its small production capacity of 250 000 t/y.

Further, it is designed to be more efficient in its use of water, energy and personnel, as well as to have a low environmental impact due to its lack of salt tailings and brine ponds on surface.

Gensource also believes that the facility is “right-sized” for a small Saskatchewan setting, employing 46 full-time staff, adding significant economic activity without being overwhelming to the local community.